The value of the output coefficient in the Taylor rule

Stochastic simulations
1

I built a simple NK model. But I am a little confused about the value of the output coefficient in the Taylor rule. According to parameter calibration, rho_Y is generally set to 0.125. But in my model, if it is set to 0.125, the model run will display “There are 8 eigenvalue(s) larger than 1 in modulus for 9 forward-looking variable(s)
The rank condition ISN’T verified!”. For this reason, I had to set the parameter value rho_Y to 0.03, but the model run found that the time for the output to return to steady state is a bit long.
Can anyone take a look at what is wrong with my model? Is it because I did not use logarithmic linearization?
nk1.mod (4.4 KB)

2

You should carefully check your timing.

d*Y=A*(K)^(alpha)*L^(1-alpha);

should for example most likely have a K(-1).

3

Thank you, professor. I modified the timing of the capital, but the problem still exists. Can you help me ?
nk.mod (4.4 KB)

4

I can only give you the generic advice. Carefully check the timing an simplify your model.